Retirement plans of Hong Kong residents inadequate, survey reveals
21 February 2013
News, Asia, Hong Kong
By Asia Asset Management
Hong Kong people are running the risk of living beyond their retirement savings by six years as the average retirement is expected to last 17 years while the average pension pot is estimated to cover only 11 years, according to an HSBC report titled ‘Future of Retirement: A New Reality’.
The survey across over 15,000 people in 15 countries and territories also reveals that on average, Hong Kong respondents aspire to have HK$436,000 (US$56,222) a year to ensure a comfortable retirement.
Meanwhile, on average, Asian respondents say they would need approximately $320,000 per year for a comfortable retirement.
The Future of Retirement survey found that over half of Hong Kong respondents are not preparing adequately or at all for retirement, even though poor health (62%) and financial hardship (50%) are the two biggest retirement fears that drive Hong Kong people to save.
Diana Cesar, head of retail banking and wealth management, Hong Kong, said: “According to Hong Kong’s 2011 census, 30% of the population will be over 65 years old by 2041. The ageing population is an increasingly imminent challenge for Hong Kong and without adequate preparation, people may struggle to maintain their standard of living in retirement and cover other expenses in later stages such as healthcare. Shifting economic and social trends require Hong Kong people to think differently, review their savings behaviour and plan better for the unexpected.”
The obstacles to saving
The survey shows that there is an awareness of retirement planning among Hong Kong people. On average, Hong Kong respondents believe that the age of 38 is the latest by which people can start planning financially to maintain their standard of living in retirement. Across Asia, (except Australia at 36%), respondents are more likely to save for retirement than for a holiday: India (61%), Hong Kong (60%), Malaysia (59%), mainland China (57%), Taiwan (57%) and Singapore (54%).
Notwithstanding these facts, nearly a third (29%) of respondents have never saved for retirement.
Life events and unforeseen crisis can pose hurdles to retirement preparation – 42% of Hong Kong people say that their efforts to save for retirement are derailed by mortgage repayments, education costs, pay cuts and economic downturn (24% each). Meanwhile, nearly a third (30%) of Hong Kong respondents (vs 29% across Asia and 31% across the globe) are willing to dip into their retirement pot in order to deal financially with unforeseen circumstances.
Ms. Cesar added: “On top of accumulating funds for retirement, people have other wealth needs at different stages of their lives – growing wealth, getting protection for families, funding children’s education or passing on wealth to the next generation. A holistic view of one’s wealth portfolio and professional planning are crucial to help assess needs, risks and the right solutions to fill the gaps and to avoid erosion of retirement savings.”
Planning with professional advice
The findings suggest a notable correlation between financial planning and saving money. In Hong Kong, almost half of respondents (48%) said financial planning led to increased retirement savings.
While the most common method of retirement financial planning is informal such as that based on individual calculations (47%), the survey claims to demonstrate that self-directed planning is less powerful than a formal approach. Only 46% of those who relied on their own thoughts and actions say they saved more for retirement compared to 61% who referred to a professional adviser to develop a written financial plan.
Ms. Cesar said: “HSBC’s Future of Retirement shows that those who seek professional advice to complement their financial planning have the greatest levels of retirement and other savings. Every step can make a big difference to retirement income in the long run. While we encourage customers to start planning and saving early, it is never too late to start or catch up with their savings. HSBC is committed to be trusted partners to our customers, leveraging our insight, expertise and world class wealth management solutions, to help them achieve a comfortable retirement and long-term prosperity for their family.”
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